What You Should Know About Creating A Partnership Agreement
When starting up a partnership with friends or family members, it may seem like an ideal business structure to operate. Not only are you comfortable and have an established relationship with your future partners, but you are also naturally confident that you can trust and rely on them to help keep the business going.
Consequently, it may seem like you can forego the formal paperwork. However, there are many hidden disadvantages that can arise, leaving you regretting the partnership altogether. This is why it is important to have a partnership agreement drafted up and signed by each partner.
A partnership agreement is a business agreement between two parties or more who are starting a joint venture. What should you include and why
Why Should You Have A Partnership Agreement?
It can be easy to start up a partnership, but it is difficult to maintain it, especially with others. Agreeing verbally to form a partnership is usually enough to establish one. It is not required to have agreement in order to create the partnership.
However, having an agreement is essential to establish the rules and guidelines all partners will follow. Because of the unlimited liability that comes with a partnership, an agreement can help to prevent or resolve any conflicts that arise. It will be a way of holding all individual partners accountable.
What Should You Include?
When creating a partnership agreement, there are a number of things to consider. From financing to the day to day operations, you and your partners need to set some ground rules on what will be handled, how and by whom.
Note that not all partnership agreements will be the same as every business partnership is unique. However, here are a few essential points you and your partners should include in your agreement:
- Business Details
- Type of Partnership
- Each Partner’s Name
- Partner Roles
- Financial contribution
- Decision making
- Dispute & Conflict Resolution
- Exit Strategy
As each of you will have different strengths and weaknesses, you and your partners should take them into consideration when assigning any roles or management tasks.
Writing The Actual Partnership Agreement
Once you and your partners have an official list of what will go into your agreement, you can start drafting it.
Now there are many sites online where you can find and download a partnership agreement template to help start you off. As you go through each point, be sure to outline protocols in detail, record and document assets, assign and describe the responsibilities of certain duties, and include methodical solutions for dealing with partner or employee disputes and exit strategies.
When the initial draft is completed, you should consult an experienced corporate lawyer in order to review it and make sure all the necessary clauses are included and that it eliminates all ambiguous phrases. Then after discussing and implementing any revisions recommended by your business lawyer, the last and final step is to date and sign the agreement.
OMQ Law offers services to review and help construct partnership agreements that are ideal for your business. Call today for a free consultation and get your business partnership off on the right foot.